HF4586
Federal deduction for qualified overtime compensation adopted.
Legislative Session 94 (2025-2026)
Related bill: SF4624
AI Generated Summary
Purpose
- This bill would add a new deduction for qualified overtime compensation to Minnesota’s individual income tax, aligning Minnesota with the federal treatment of overtime pay. It creates a specific subtraction from Minnesota taxable income for overtime income.
Main Provisions
- Adds Subdivision 40, titled “Overtime income,” to Minnesota Statutes 2024 section 290.0132.
- The amount of qualified overtime compensation allowed as a deduction under Internal Revenue Code Section 225 is treated as a subtraction for Minnesota tax purposes.
- The subtraction is allowed for taxable years beginning after December 31, 2028 (i.e., starting with tax years 2029 and later).
- Notwithstanding Internal Revenue Code Section 225(g), the subtraction under this subdivision is allowed. In other words, Minnesota will grant the deduction despite federal limitations that might apply in Section 225(g).
Significant Changes to Existing Law
- Creates a new subtraction category within Minnesota’s income tax framework by adding a dedicated “Overtime income” subdivision to Minnesota Statutes 2024 section 290.0132.
- Establishes a state-level deduction that follows the federal rule for qualified overtime compensation, but with a Minnesota-specific effective date and the explicit override of certain federal limits.
Effective Date and Scope
- Effective for taxable years beginning after December 31, 2028 (starting in 2029).
Implications
- Taxpayers who receive qualified overtime compensation could reduce their Minnesota taxable income by the amount treated as a deduction under IRC Section 225.
- This change may affect state revenue and could influence how overtime pay is valued for state tax purposes.
Relevant Terms - qualified overtime compensation - overtime income - subtraction - Internal Revenue Code Section 225 - IRC 225(g) - Minnesota Statutes 2024 section 290.0132 - taxable years beginning after December 31, 2028 - federal deduction for qualified overtime compensation
Bill text versions
- Introduction PDF PDF file
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| March 23, 2026 | House | Action | Introduction and first reading, referred to | Taxes | |
| March 25, 2026 | House | Action | Authors added |
Citations
[
{
"analysis": {
"added": [],
"removed": [],
"summary": "Minnesota Statutes: Amends Minn. Stat. 290.0132 by adding Subd. 40 (Overtime income) to create a subtraction for qualified overtime compensation under the federal deduction referenced in the bill.",
"modified": []
},
"citation": "290.0132",
"subdivision": "Subd. 40"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Federal law reference: Internal Revenue Code Section 225(g), cited in connection with the deduction for qualified overtime compensation.",
"modified": []
},
"citation": "26 U.S.C. § 225(g)",
"subdivision": ""
}
]Progress through the legislative process
In Committee